Cholamandalam Distribution Services Limited, CHENNAI V. ACIT, CHENNAI

ITA 1953/CHNY/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 8356 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-10-2016
• Appeal Filed By: Assessee
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 29-06-2016
• Court: TRIBUNAL
• Department Lawyers: JAYANTHI KRISHNANCIT
• Assessee Lawyers: SAROJ KUMAR PANDA
• Keywords: Depreciation; Revenue expenditure; Capital expenditure

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : CHENNAI , . !' BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI G.PAVAN KUMAR, JUDICIAL MEMBER ./ I.T.A.NOS.1952 & 1953/MDS./2016 / ASSESSMENT YEARS : 2008-09 & 2009-10 M/S.CHOLAMANDALAM , DISTRIBUTION SERVICES LTD., NO.1, NSC BOSE ROAD, CHENNAI 600 001. VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE-I(2), CHENNAI 600 034. [PAN AABCC 4868 J ] ( #$ / APPELLANT) ( %&#$ /RESPONDENT) / APPELLANT BY : MR.SAROJ KUMAR PANDA,ADVOCATE /RESPONDENT BY : SMT.JAYANTHI KRISHNAN,CIT DR / DATE OF HEARING : 15 - 0 9 - 201 6 !' / DATE OF PRONOUNCEMENT : 05 - 10 - 2016 ' / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THESE TWO APPEALS OF THE ASSESSEE ARE DIRECTED A GAINST THE DIFFERENT ORDERS OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-I, CHENNAI DATED 05.04.2016 PERTAINING TO ASSESSMENT YEARS 2008-09 AND 2009-10. SINCE ISSUES INVOLVED IN THESE ASSES SEES APPEALS ARE COMMON IN NATURE, THESE APPEALS ARE CLUBBED TOGETHE R, HEARD ITA NO.1952/MDS./2016 :- 2 -: TOGETHER, DISPOSED OFF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. THE GRIEVANCE OF THE ASSESSEE IN BOTH THE APPEA LS IS WITH REGARD TO FINDINGS OF THE LD.CIT(A) THAT EXPENDITUR E INCURRED WITH REFERENCE TO PARTITIONS AND OTHER WORK IN THE LEAS E HOLD PREMISES JUST BY WAY OF RENOVATION OR IMPROVEMENT, IS A CAPITAL E XPENDITURE ENTITLED FOR DEPRECIATION @ 10% INSTEAD OF TREATING IT THE S AME AS REVENUE EXPENDITURE. 3. THE FACTS OF THE CASE ARE THAT ORIGINALLY THE A SSESSEE CAME IN APPEAL BEFORE THIS TRIBUNAL IN IRA NO.540/MDS./2013 FOR ASSESSMENT YEAR 2008-09 DATED 07.03.2014 & ITA NO.1417/MDS./20 14 FOR ASSESSMENT YEAR 2009-10 DATED 18.08.2014 WHEREIN TH E TRIBUNAL REMITTED THE ISSUE BACK TO THE FILE OF AO WITH A DI RECTION TO RE-EXAMINE THE ISSUE AFRESH IN ACCORDANCE WITH LAW. IN THE SEC OND ROUND ALSO, THE LOWER AUTHORITIES OBSERVED THAT THE EXPENDITURE INC URRED BY THE ASSESSEE IS WITH REGARD TO RENOVATION CARRIED OUT I N THE RENTAL PREMISES LOCATED VARIOUS PART OF THE COUNTRY, WHICH INCLUDES INTERIOR DECORATION/PARTITION AS A CAPITAL EXPENDITURE, THE ASSESSEE IS ENTITLED FOR ONLY DEPRECIATION IN VIEW OF THE PROVISIONS IN EXPLANATION-1 TO SEC.32(1) OF THE ACT. AGAINST WHICH THE ASSESSEE I S IN APPEAL BEFORE US. ITA NO.1952/MDS./2016 :- 3 -: 4. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. ADMITTEDLY IN THIS CASE THE ASSESSEE CARRIE D OUT THE RENOVATION WORK WHICH INCLUDES FALSE CEILING, FLOORING, INTERI OR WORKS, ELECTRICAL WORKS, CARPETS, PARTITIONS, WOODEN STRUCTURES ETC. IN VARIOUS RENTAL PREMISES SO AS TO MAKE THE PREMISES HABITABLE AND T HE ASSESSEE CANNOT EXTEND OR ANY IMPROVEMENT TO THE LEASED PREM ISES SO AS TO HOLD IT AS AN EXPENDITURE BROUGHT BENEFIT TO THE AS SESSEE WHICH IS ENDURING NATURE. FURTHER, IT IS NOTED THAT IN THE CASE OF M/S.RIALTO ENTERPRISES PVT LTD., VS. JCIT IN ITA NO.803/MDS./2 016 FOR ASSESSMENT YEAR 2008-09 VIDE ORDER DATED 11.08.2016, THE TRIBU NAL OBSERVED THAT EXPENDITURE INCURRED BY THE ASSESSEE ON PAINTING, R ELAYING OF DAMAGED FLOORS, PARTITIONS ETC. IN LEASEHOLD PREMISES IS AL LOWABLE AS REVENUE IN NATURE. FURTHER, THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. AYESHA HOSPITALS (P) LTD. REPORTED IN 292 ITR 266(M AD.) OBSERVED THE SAME. FURTHER, THE JURISDICTIONAL HIGH COURT IN T HE CASE OF THIRU AROORAN SUGARS LTD VS. DCIT REPORTED IN [2013] 350 ITR 324 (MAD) HELD AS UNDER:- 3. LEARNED COUNSEL APPEARING FOR THE ASSESSEE PLAC ED RELIANCE ON THE DECISION OF THIS COURT REPORTED IN CIT V. AY ESHA HOSPITALS P. LTD. [2007] 292 ITR 266 (MAD), WHEREIN IN RESPECT OF THE CLAIM MADE FOR THE ASSESSMENT YEAR 1991-92, THE ASSESSEE CLAIMED THE AMOUNTS SPENT ON PAINTING, REL AYING OF THE DAMAGED FLOORS, PARTITIONS, ETC., AS REVENUE EX PENDITURE. ITA NO.1952/MDS./2016 :- 4 -: ON AN APPEAL BEFORE THIS COURT BY THE REVENUE, IT W AS POINTED OUT THAT THE ASSESSEE INCURRED EXPENDITURE FOR RELA YING OF THE DAMAGED FLOORS, PAINTING AND PARTITION IN RESPECT O F THE LEASED PROPERTY. REFERRING TO THE DECISION OF THE APEX COU RT REPORTED IN CIT V. MADRAS AUTO SERVICE P. LTD. [1998] 233 IT R 468 (SC), THIS COURT POINTED OUT THAT THE EXPENDITURE INCURRE D IN RESPECT OF THE MAINTENANCE OF THE LEASED PREMISES WAS DEDUC TIBLE AS REVENUE EXPENDITURE. 4. AS REGARDS THE CONTENTION TAKEN BY THE REVENUE P LACING RELIANCE ON EXPLANATION 1 TO SECTION 32(1)(II) OF T HE INCOME-TAX ACT, WHICH WAS INSERTED WITH EFFECT FROM APRIL 1, 1 988, THIS COURT POINTED OUT THAT THE EXPLANATION IS AN EXCEPT IONAL ONE WHICH PERMITS DEPRECIATION IN CASES WHERE THE ASSES SEE DOES NOT OWN A BUILDING, IN RESPECT OF WHICH THE ASSESSE E INCURS CAPITAL EXPENDITURE ON THE CONSTRUCTION OF ANY STRU CTURE OR DOING OF ANY WORK, IN OR IN RELATION TO, AND BY WAY OF RENOVATION OR EXTENSION OF, OR IMPROVEMENT TO THE B UILDING. 5. APPLYING THE ABOVE SAID DECISION OF THIS COURT T O THE FACTS OF THE PRESENT CASE, WE HOLD THAT THE TEMPORARY STRUCT URE BY MEANS OF FALSE CEILING AND OFFICE RENOVATION HAD NO T RESULTED IN ANY CAPITAL EXPENDITURE. THE BENEFIT OF THE ABOVE S AID DECISION OF THIS COURT HENCE, APPLIES TO THE FACTS OF THE CA SE. ACCORDINGLY, THE QUESTION IS ANSWERED IN FAVOUR OF THE ASSESSEE AND THE TAX CASE (APPEAL) STANDS ALLOWED. NO COSTS. IN VIEW OF THE BINDING DECISIONS OF THE JURISDICTIO NAL HIGH COURT, WE ARE INCLINED TO HOLD THAT THE EXPENDITURE INCURRED BY T HE ASSESSEE FOR RENOVATING THE EXISTING LEASED PREMISES IS ONLY IN THE FIELD OF REVENUE ITA NO.1952/MDS./2016 :- 5 -: AND IT CANNOT BE SAID THAT THE EXPENDITURE WAS IN N ATURE OF CAPITAL FIELD. MORE SO, ALL THE JUDGMENTS CITED BY THE LD. A.R WERE DECIDED IN FAVOUR OF THE ASSESSEE HOLDING THAT EXPENDITURE INC URRED IN LEASED PREMISES WITHOUT EXTENDING THE AREA OF CONSTRUCTIO N, THE SAID EXPENDITURE IS REVENUE IN NATURE. ACCORDINGLY, THE APPEALS OF ASSESSEE IN BOTH THE ASSESSMENT YEARS ARE ALLOWED. 5. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE IN ITA NOS.1952 & 1953/MDS./2016 ARE ALLOWED. ORDER PRONOUNCED ON 05 TH OCTOBER, 2016, AT CHENNAI. SD/ - SD/ - ( . ) ( G.PAVAN KUMAR ) / JUDICIAL MEMBER ( ) (CHANDRA POOJARI) / ACCOUNTANT MEMBER #$ / CHENNAI %& / DATED: 05 TH OCTOBER, 2016 K S SUNDARAM &'(()*( +* / COPY TO: ( 1 . / APPELLANT 3. ( ,(- . / CIT(A) 5. */0 (1 / DR 2. / RESPONDENT 4. ( , / CIT 6. 02(3 / GF